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23
Jun
2014

The New Amazon Fire Phone is a Stealth Market Disruptor

by Bill

Stealth phoneSpeculation has been long been rampant regarding Amazon’s entry into the smartphone business, expectations being that the phone would be a major disruptor, including speculation that it would be given away for free.

Amazon pulled the wraps of their new phone recently, and the device, dubbed the Amazon Fire Phone was revealed to be, contrary to the speculation, yet another high-end entry into an already crowded space. Also contrary to the speculation by industry watchers, the phone’s pricing and marketing plan is anything but disruptive, being offered exclusively by AT&T with pricing in line with other smartphones, ranging from $199 to $299 depending on storage capacity, with a two-year contract, with unlocked phones selling for $649 and $749.

Amazon’s business model has long been to significantly undercut its competitor’s pricing, whether it’s in books or dish detergent, or with its Kindle line of tablets, offering a simple, yet compelling reason for consumers to use the online retail giant. With this phone, Amazon appears to be offering something that is not that different than competing products, for more or less the same price as their competitors. Sure there are some unique features, such as their trick 3D display technology, 13 megapixel cameras, both front and back, and unlimited cloud storage, as well as an interesting product support feature, Mayday, which provides instantaneous tech support. However their “killer app,” and seemingly the whole point of the device is Firefly, their exclusive shopping application that will allow users to point and click and nearly anything in the real world, from a TV in your local Best Buy to groceries in your supermarket, which will instantly tell you if the item is available on Amazon, and if it’s cheaper, which in many cases it is, you can make your purchase directly from the phone.

Coupled with the purchase of the Amazon Fire, owners receive a free year’s subscription to Amazon Prime, which usually costs $99, softening the phone’s pricing blow, and bringing with it all of the popular goodies that membership brings, from streaming music and movies, to crucially, free two-day shipping on purchases at Amazon.

Firefly currently recognizes over 70 million products, and with a dedicated button on the side of the phone, it promises to make “showrooming,” visiting brick and mortar stores to see a product, then buying it cheaper online, as convenient as possible for consumers, however it should be noted that there are existing apps available for Apple and Android devices that already do just that, though obviously, Firefly is much more tightly integrated into the smartphone experience than the other platforms’ standalone apps.

Amazon’s operating system for the Fire phone, Fire OS, while based on the Android operating system, is so heavily modified that it has been denied access to the Google Play store, the primary source of approved apps for Android devices, but Amazon is predicting that developers will provide versions of their apps for this new platform, though that remains to be seen. More importantly it remains to be seen how much additional revenue Amazon can reap from users of the Fire Phone from selling them products and services, and if those numbers make the business case for it, the much-hyped “free” smartphone from Amazon may just yet come to pass. In the meantime, Amazon faces a battle as it tries to shoulder its way into an already-saturated smartphone market.

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